Goosmann Law Firm 0:01

Do complex legal issues hold you back? Let's get energized and bring clarity to your top legal questions. This is Law Talk with the Flock by Goosmann Law Firm.

Jeana Goosmann 0:29

Hello, I'm your host, Jeana Grossman , CEO attorney and author of Law Talk with the Flock here to help navigate you and your way through the law, your business and life as a leader. Today I'm really excited to have with me attorney Elizabeth La lly w ho is one of the partners at Goosmann Law Firm and she also co-leads our banking and bankruptcy practice area group. Welcome Elizabeth.

Elizabeth Lally 0:54

Good morning. Thanks for having me.

Jeana Goosmann 0:56

Yes, excited to have you on. Law Talk with the Flock today and we were just discussing that today happens to be May the fourth and that is a fun day for Star Wars fans in particular. Elizabeth, will you share with us your cute kiddos that you have at home today?

Elizabeth Lally 1:12

So this is who I left at home this morning. Gabriel and Genevieve, 10 and 7. My little Stormtroopers, they're very excited for May the fourth .

Jeana Goosmann 1:20

That's awesome. Well and their mom is a Stormtrooper too and some respects because she has to help fight for businesses when they're going through tough times or help with banks when they're trying to address some tough sticky issues as well. So that's a little bit what we're going to talk about today. And especially right now with COVID-19 and all the legal changes. I personally can't remember a time that we've seen so many huge laws passed so quickly that impacts so many businesses.

Elizabeth Lally 1:50

Oh, for sure. Yeah. It's been difficult to keep up with from a legal perspective. So I know that a lot of my clients, our clients have reached out to us continuously with questions as things are passed. And so we thought it might be beneficial to talk a little bit about the world of collections and how it has or hasn't changed.

Jeana Goosmann 2:08

Exactly. So let's jump right into that, Elizabeth, and talk a little bit about what some creditors in particular need to know about how the laws have changed if they have some debts that they need to collect.

Elizabeth Lally 2:20

So the short of it is that it really depends on the type of debt that the creditors trying to collect and then how far along they are in the debt collection process.

Jeana Goosmann 2:32

Okay. So there've been different state laws as well as federal laws and just for somebody listening like my mom; what's the difference between a state law and a federal law?

Elizabeth Lally 2:43

Okay. Well a federal law is something that applies nationally. Part of the federal system and a state law is something that only applies in the states where you live or where you're attempting to collect suit.

Jeana Goosmann 2:57

Okay. Very good. And we've had different changes, both aspects, haven't we? Some States have enacted Dover Laws and we've had different federal laws. That the United States is enacted. And so we'll jump into that a little bit. And with the type of debt, what's the main difference between if you're trying to go after individuals versus companies? Does that matter?

Elizabeth Lally 3:17

Well, right now actually the majority of what I've been seeing, it doesn't matter. However, in action it is going to affect consumer debts more disproportionately than commercial debts. I can talk a little bit about that for you.

Jeana Goosmann 3:36

So let's jump into that. Yeah, absolutely. And what's the difference between consumer debt and commercial debt? And that I always thought, you know, when you're going after an individual, if they owe some money, you have to see is this consumer debt cause that tends to matter under the law and versus if it's a business and you're collecting a business to business debt, then there's different rules that apply and they're not quite as stringent sometimes is going after consumers. So yeah . Can you explain that some more for us?

Elizabeth Lally 4:02

Sure. So a consumer debt is what you would think of as an individual debt. These are debts that most people own that's , that are on their cars , on their homes, on their credit cards. So these are individual debts whereas corporate debts are things more like your rental agreements, goods and services, things like that. And so the Cares Act, which e verybody's been talking about so much-

Jeana Goosmann 4:25

A big 1200 page law that they enacted the $2 trillion, right? That was the first go round anyway of the money.

Elizabeth Lally 4:34

Right. So that affects what we largely think of as being consumer debts. And so within that there is a temporary relief from foreclosure. And so that tells banks such as those large banks that we represent that if the borrower on a federally backed mortgage reaches out to you and asks for a forbearance, which means a temporary suspension of their payment obligations you have to try to give it to them and you cannot report that debt as being paid late under the consumer reporting. So generally everybody knows they have a credit score. So your lenders report monthly on whether or not you're paying your debts and if you're paying them on time. So if you do get a forbearance as part of this Cares Act can not be reported as late, which means it can not negatively affect your credit score. But again, this is only for federally backed mortgages. So the first question is, is it a federally backed mortgage? And not all mortgages are federally backed. There's also a temporary forbearance for what we call multifamily properties. And so this is what you would think of more as an investment property. Somebody buys a duplex or triplex and they are renting those out. Those are also protected as long as there are I think five or more units. And also there's a temporary suspension of evictions from those properties. But again, those investment properties have to be federally backed mortgages and there's also a temporary collection of student loan debt, but again, that is federally backed student loans and not privately backed student loans. And there was actually just a class action filed against that on Thursday because the Department of Justice has been continuing to collect. So there's some disconnect with the government being able to keep up and to tell people, businesses really to stop those garnishments. And so the federal Cares Act affects mostly just your consumer debt.

Jeana Goosmann 6:45

And also just the consumer debts that have a federally backed loan connected to them. So if it was all private money the Cares Act really didn't impact what was going on.

Elizabeth Lally 6:55

Correct. So the Cares Act didn't affect things if they were not federally backed. And again, that's not everything that's, you know, Fannie or Freddie type loans where this government backing of that loan. But I will say that the majority of our large institutional banking clients have been providing forbearances because of COVID-19 regardless of whether or not the mortgage is federally backed. And so we have do have cases in litigation where borrowers have contacted the bank and requested a forbearance and those forbearances are being given regardless of whether or not they're federally backed loans for the clients that we represent.

Jeana Goosmann 7:39

Now let's jump over and talk about business debts. And if there is a business that owes another business money , what's going on in that circumstance right now, even during COVID-19.

Elizabeth Lally 7:50

So this is where we're going to talk about state laws. Okay. So when you asked the difference between the two federal and the state laws. The state laws are the ones that are really affecting our ability , if at all to collect on what we consider commercial debt. And so this has depended on number one, if the state has passed a temporary proclamation or regulation, and we work largely in Iowa and Nebraska and South Dakota. And so South Dakota and Nebraska have not done anything to stop commercial collections. So all of the cases that we have going on in Nebraska and in South Dakota have been able to continue. The only thing that's changed is if the client has asked us to. And we do have a couple of clients that have asked us to get temporary extensions of deadlines, perhaps not to take depositions because o f travel restrictions or to not take d ebtors examinations of the travel restrictions. And so those are mostly being driven by our clients and not necessarily by the courts.

Jeana Goosmann 9:02

I feel like Iowa is a little different though.

Elizabeth Lally 9:04

Yes, Iowa is different. So Iowa Governor Reynolds on the 24th of April, passed a proclamation and in this proclamation he suspended the collection of garnishments and the execution of garnishments. And so I wrote to the Attorney General's office when this was filed and I asked the Attorney General's office if this proclamation affected consumer debt as well as commercial debt. And it wasn't clear. And the Attorney General's office wrote back and said that it covers all that. So unfortunately I had some cases which were really on the brink of just having to do what we call condemning the funds. So I had already issued garnishments to banks. I had already had checks written. I just need to , to condemn the funds. And this proclamation stopped me from condemning those funds, but only as we've been telling our clients until May 27th. And so the proclamation in Iowa is temporary. And again, it really only, it depends on how far along you are in your case. So we have other cases, other clients where we have brought suit and we're simply waiting for an answer or we are not at the execution or the garnishment stage because we don't have a judgment. And so that case work has been allowed to continue regardless of the proclamation. So Iowa is very much look at the case, look at how far along you are and then reminding clients that these are only temporary measures. The proclamation itself says not to expect it to be extended beyond the 27th of May. And so what we've basically been telling our clients is if you have a commercial that you can still see on it.

Jeana Goosmann 10:51

Okay. So governor Kim Reynolds, it has a proclamation out there, but it will expire at the end of the month and we'll keep monitoring if she implements any new proclamations of course. And how about what are we seeing as it relates to how we can help our clients and this time, cause there is a lot of different things going on and , and clients are uncertain on you know, they have people that are owing them money, they have growing accounts receivables if they're a bank and they have a lot of new laws and regulations. So how are we helping right now, Elizabeth?

Elizabeth Lally 11:25

Well, the first thing we're doing is we're looking at what is the nature of the debt ? Is it commercial or is it consumer? And what is the debt that we're trying to collect on based on those, the answers to those questions, we are in most instances still initiating suit in order to collect on the debt or we are preparing suit so that we're able to move forward once the restriction or the proclamation or lifted. Sometimes it's just internal guidelines. It helps in order to do the analysis and have the suit ready to go. So even if the client might feel uncomfortable right now, it's good to get it ready to go. The other thing I would say is that you always as a creditor want and get in line as soon as you can.

Jeana Goosmann 12:11

B ecause it c an be a race, right? There's only so much there.

Elizabeth Lally 12:14

It is. It's often a race to the courthouse. And so we want to get our s uit started and get as far along down the pipeline as we can before other creditors start to file. In terms of bankruptcy as well, which we haven't talked about. But we do a great deal of here.

Jeana Goosmann 12:32

I think we'll have a whole other podcast on bankruptcy issues.

Elizabeth Lally 12:35

Bankruptcy continues and it's continuing at a breakneck speed. So our advice to our clients on bankruptcy is basically just that we monitor the docket , we see what, what debtors are proposing and, and yes, we could do a separate podcast just on bankruptcy.

Jeana Goosmann 12:51

And that's really an increasing practice area right now. Unfortunately for our country as a whole. But we have experts in the firm that know those laws and certainly w e're able to help clients out when those issues arise. So thank you so much for sharing your expertise with us today, Elizabeth. And I want everyone to check out our COVID-19 toolbox at goosmannlaw. com which our team has been working hard to keep up with these laws and provide resources to each of you. And thank you again for joining me today and I want everyone to stay healthy and go make it a great day. Go make it worth it. Thank you.

Speaker 1 13:27

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Speaker 3 13:53

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